boardroom dynamics 023 8074 44501 benefits of ned’s in the sme sector presented by leslie spiers...

Boardroom Dynamics 023 8074 4450 1

Benefits of NED’s in the SME Sector

Presented by

Leslie Spiers MA MBA DMS CertEd

Boardroom Dynamics Ltd


The business literature is unanimous

Board is no longer a cosy affairProactive and transparentGrowth in status of NED = more scrutinyDiverse opinions improve the board decisionsEffective boards = Mix of Exec and NED


Appointing NED’sHistorically poor - Smoke filled roomsFewer than 4% have formal interviewFewer than1/3 Chairs help NED inductionDiversity vs. group think vs.quotas


Directors’ legal requirements Now codified in Companies Act 2006

Act within your powers

1. Promote the success of the company for members

2. Exercise independent judgment

3. Exercise reasonable care, skill and diligence

4. A general duty to avoid conflict of interest

5. Duty not to accept benefits from 3rd parties

6. Duty to declare an interest in proposed transactions


The Board

AccountabilityTo the companyTo OwnersTo regulators and legislatorsTo StakeholdersEnsuring Directorial Audit

Policy Formulation

Stating PurposeCreating Vision and ValuesDeveloping corporate climateMonitoring the external environment

Strategic Thinking

Market PositioningSetting corporate directionReviewing resourcesSetting implementation processes

Supervising ManagementPerformance ManagementBudgetary ControlReview of key business resultsOrganisational capability

SHORT TERM LONG TERMOperations Review Cycle

INTERNAL

EXTERNAL

Governance Review Cycle Strategy Review Cycle

Responsibilities of the Board


Board composition & organisation

"A Board may be composed of brilliant individuals and yet be ineffective.

It can only fulfill its true potential as a Board if it is properly selected, organised and led."

Good practice for directors – Standards for the Board


Directors……Establish clarity of mission, vision and values

to lead the broad direction of the company

Decide upon the strategies and structureto ensure the company's survival & prosperity

Delegate to management and involve staff to effect implementation of strategy, policies & plans

Exercise responsibility to shareholders and other interested partiesto promote & meet their legitimate interests


The Role of the NED

“To help build a successful company”

Higgs suggests 4 components– Strategy– Performance– Risk– People

The role is to balance monitoring with strategic aspects


NED Engagement in Strategy

SWOTPEST LIEDPorter Boston BoxAnsoff Matrix

Strategic Alternatives

Strategic Choice

StrategyImplementation

Where most CEOs

Engage their

NEDs in Strategy

Optimal Point to

Engage NED

in Board Strategy


Keep a close eye on risk!


People and performance

Confidential, structured interviews typically conducted by a third party but sometimes conducted by the Chairman, the Chair of the Nominating/Governance Committee or the corporate secretary; this methodology is used by 43% of UK boards

What was the most significant decision this board made in the past year?

If you could change one thing about this board, what would you change – and why?

What do you see as the board’s most important priorities over the next 6, 12, 18 months?

How would youdescribe the working relationship between the board and the CEO?

What are the major risks facing this company?


What are the benefits of an NED?• Strategic and long term perspective

• Financial scrutiny, business compliance and governance

• Monitors executive decisions

• Independent mentor and sounding board

• Constructive challenger, reflector and pain in the bum

• Performance monitoring and driving ethical matters

• Dealing with risk and managing change

• Director evaluation and remuneration

• Source of appeal (and reason), fire fighter

• Over reliance on one person

• Restrains power mad entrepreneurs/motivates lazy devils


NED RemunerationFees for <£5m Turnover

LQ Median UQChairman 6000 18000 35000NED 10050 15000 29350Fees for >£5m to <£50m TurnoverChairman 18337 30000 41750NED 10000 20000 28750Source: IOD Croner Reward, Director Remuneration, October 2008


NED Time Input (Days pa)<£5m Turnover

MeanChairman 24NED 14>£5m to <£50m TurnoverChairman 44NED 14Source: IOD Croner Reward, Director Remuneration, October 2008


Strategic DirectionContributes creatively and realistically to planning

2

Can balance needs and constraints 2

Has deep knowledge and understanding of strategy

1

Holding to AccountAccepts personal accountability for delivering agreed actions

2

Challenges constructively and effectively 3

Contributes to effective governance

1

Influencing & CommunicationManages board meetings and board processes well

2

Persuades with well-chosen arguments 3

Uses facts and figures to support argument 3

Uses subtle and informal tactics to persuade

2

Team WorkingInvolves others in decision-making process

2

Respects other team members 1

Understands the Non-Executive Chairman’s role 1

Coaches and mentors other directors 2

Shares expertise and knowledge freely 3

Personal QualitiesAssertive without being aggressive

2

Acts confidently and is accessible 2

Willing to accept a challenge 2

Enthusiastic and a champion of the business 2

Emotionally resilient and a stable influence on the board

2


Characteristics

What is the make up of the NED?

What are implications for

– Selection

– Induction

– Performance Measurement


NED Requirements

SkillsSkills ExperienceExperience

CharacteristicsCharacteristics


NED CharacteristicsCounsellor Speak-outer Sounding

BoardWailing Wall Bullet-biter Stand-in

Put in toucher Team Leader Stimulator Nurturer Adviser Expeditor

Disagreer Encourager Comparer Follow-upper Copywriter Enhancer

Partner Kite flyer Critical friend Intervener Idea provider Teacher

Substitute Questioner Seller Facilitator Catalyst Recommender

Helper outer Tactician Dismisser Challenger Drafter Mountain Guide

Listener Autocrat Judge Jury Negotiator Supporter


Why Characteristics Matter

Characteristics

Tasks

Job Complexity

Simple Difficult


What drives our Behaviour?

SkillKnowledge

Social RoleSelf Image

TraitsMotives

Easy to acquire

Harder to acquire


So, what is needed?

Understanding Context

Relationships

Influencing the context

Proactive

Self Confidence

Insightful Integrity

Working the Context



The foundation stone of the NED Not just about honesty Alert and engaged Guarding against complacency Scan the business and its context Ask brave and probing questions Identify and distil important issues Willing to act in line with insights


What is needed?


Relationships


Proactive

Self Confidence


Working the Context


Proactive Self Confidence

The confidence to challenge the Board/CEOFacing the issue of being a minorityComfortable asking the awkward questionHaving positive intentChallenge with supportKnowing when and how to make impact


Proactive Self Confidence

Asking questions and feeling stupid at times

Not just sitting and being dumb

If it does not sound right - open it up

Action without rocking the boat


What is needed?


Relationships


Proactive

Self Confidence


Working the Context


Working the Context

Ability to understand the contextKnowing the dynamics of the boardPossessing a degree of realismSustaining the right relationshipsInfluencing the contextAbility to make things happen


Becoming an effective Non-Executive Director:

A leadership programme for aspiring and new Non-Executive Directors in the SME sector.

Board Development for Non-Executive Directors from Boardroom Dynamics Ltd.

Need more?

Duration, Date and Venue

Monday March 22nd 9.3am until 5.00pm Guildsrealm House, Ensign Way, Hamble, SO31 4RF

boardroom dynamics 023 8074 44501 benefits of ned’s in the sme sector presented by leslie spiers...

Documents

board slide

board strategy slide

ned slide

unanimous board

board accountability

proposed transactions

implementation of strategy

board composition organisation